Insurance

Primer

A
GUIDE
FOR
SEAPLANE
OWNERS

Seaplane
Pilots
Association
 INTRODUCTION

Insurance is one of the most expensive and least

understood aspects of owning a seaplane.
Fortunately, with a little effort you can learn a
few basic principles that will help you save time,
avoid common pitfalls, and potentially save a
bundle of money.

This brochure was developed by the Seaplane

Pilots Association to teach you what you need to
know to make informed decisions about insuring
a seaplane. It is based on the collective experi-
ence (and inexperience) of our members, as
observed by our staff and volunteers. While we
sought the advice of professionals in the field of
insurance, this brochure was written by and for
seaplane owners.

Although SPA endorses a specific insurance bro-

ker, Falcon Insurance Agency, this brochure is not
specific to any one broker or insurance company.
The concepts presented here are applicable
regardless of the company that provides your
insurance.

We hope that this pamphlet takes the mystery

out of buying seaplane insurance and provides
you with practical tips to enhance your insurabili-
ty, reduce your premiums, and protect against
the unforeseeable.
THE PLAYERS

Insurance Companies
Insurance companies issue insurance policies
and pay claims. They are responsible for
determining how much your insurance policy
will cost, the limits of your coverage, and
the conditions you must meet to keep your
insurance in force. Some insurance companies,
called direct writers, will only issue quotes
directly to customers, but most issue quotes
only through brokers. Only one major direct
writer, Avemco, insures seaplanes.

Insurance Brokers
Brokers are frequently confused with insurance
companies. Brokers represent their client’s
interests to the various insurance companies,
obtain quotes, bind coverage, and provide
policy services such as adding or changing
coverage, renewing policies, and collecting or
refunding premiums. Brokers do not set rates
or limitations, and they do not assume any risk
or pay any claims.

Reinsurance Companies
Insurance companies themselves buy insur-
ance against major losses from reinsurance
companies. This is important to understand
only because reinsurance rates are influenced
by factors totally unrelated to seaplanes, such
as terrorism and natural disasters. Thus,
seaplane insurance premiums will fluctuate even
when seaplane-related claims remain stable.

A DUT Y TO DEFEND

One of the more valuable benefits of liability insur-

ance is the insurance company’s duty to defend you
if you are sued as a result of an accident. Legal fees
can be astronomical in such cases, but most insur-
ance policies will both provide and pay for your
legal defense without reducing the limit of liability
available for judgments and settlements.
SELECTING A BROKER

Most pilots assume that shopping for a broker

and shopping for insurance are one and the
same. Ask several brokers for quotes, and the
best broker will provide the best quote, right?
Wrong! Before you consider asking anyone for a
quote, you should shop for and select a broker.

Recall that insurance brokers do not set

insurance premiums. Instead, they gather
your information and take it to a number of
insurance companies for quotes. Those
insurance companies, if they opt to offer
coverage, give the broker terms, including
a price and policy limitations. Your broker then
discusses all the quotes with you, and you
determine which policy best fits your needs.

There are very few insurance companies that

will write seaplane policies, but there are thou-
sands of brokers who will gladly seek a quote
on your behalf. To avoid issuing countless iden-
tical quotes to multiple brokers for the same
end customer, most insurance companies will
only recognize one broker per customer. Thus,
the first broker to contact an insurance compa-
ny on your behalf will be recognized by that
insurance company as your exclusive broker, or
broker of record.

Since the insurance companies contacted by

your first broker will not release quotes to any
other broker, your first broker will have a
tremendous advantage over all subsequent
brokers. So long as the first broker you contact
is modestly competent, he should return the
best quote, even if he is the least competent
broker of the brokers you contact.

Broker of Record
As discussed in Selecting a Broker, most
insurance companies will recognize the first
broker to seek quotes on your behalf as your
exclusive broker of record.

Note that you can have a different broker

represent you to each of the several insurance
companies that write seaplanes, but you
cannot have more than one broker represent
you to any one insurance company.

You can change your broker of record at any

time, but doing so will not change quotes
already issued, and will take some time.
Changing your broker of record at a given
insurance company requires a letter from you
to the insurance company requesting that the
insurance company recognize a new broker as
your broker of record. The insurance company
will notify your old broker, and after waiting for
a few days to ensure that you don’t change
your mind, will begin working exclusively with
your new broker.

Note that a change of broker of record is

specific to the insurance company contacted.
INSURANCE FOR SEAPLANE PILOTS
 FALCON
INSURANCE AGENCY
HAS MADE
A BIG SPLASH IN
SEAPLANE INSURANCE

Falcon Insurance Agency and the

Seaplane Pilots Association have joined
forces to make a big splash in aviation
insurance. Our new SPA Insurance
Program offers members the most
comprehensive insurance solutions
available, with enhanced coverage,
a variety of underwriters, and dedicated
professional service. This program is
distinguished from the pack by higher
limits of liability, competitive prices and
available coverage for seaplane operators,
including commercial operators and Lake
Amphibian owners.

TO LEARN HOW WE CAN HELP

YOU, C ALL US T ODAY AT

1 - 8 6 6 - 217 - 4 S PA
1 - 8 6 6 - 217 - 4772
OR VISIT US ONLINE AT
WWW.FALCONINSURANCE.COM
 COVERAGES
AVAILABLE

Stated Value Physical Damage

Aircraft Limits of Liability as Required

Aircraft Premises Liability

Medical Coverage $3,000 per Person

Non-Owned Physical Damage

and Liability

Non-Owned Hangar Liability $25,000

Emergency Landing and

Search and Rescue Coverage $10,000

Personal Effects Coverage $1,000

Lienholder’s Interest
or Breach of Warranty as Required

Expanded Territorial Coverage

 C ALL US T ODAY AT

1 - 8 6 6 - 217 - 4 S PA
1 - 8 6 6 - 217 - 4772
OR VISIT US ONLINE AT
WWW.FALCONINSURANCE.COM
EARLY CANCELL ATION

Some pilots try saving money by buying insurance in

the spring and canceling it in the fall. Bad idea! Your
annual insurance premium covers risk that is primari-
ly seasonal. Cancel early, and you deny the insurer
premium for risk already covered. The following
spring, you might find the underwriter less willing to
offer you another policy or a competitive rate.

Note also that your old broker will probably

contact you during the waiting period to lobby
for your business.

You can change your broker of record at any

time, but to avoid alienating both brokers and
insurance companies, you should exercise
restraint, and change brokers only when you
have good cause. Further, you should change
your broker of record before buying your
insurance policy, and preferably before your old
broker has obtained a policy renewal quote.

Direct Writers
Insurance companies that sell directly to
customers (namely Avemco in the aviation
insurance market) do not participate in the
independent broker system. Hence, seeking a
quote from a direct writer will not restrict your
choice of brokers. However, a quote from a
direct writer is a quote from one insurance
company, whereas a quote from a broker is
the best quote available from a selection of
insurance companies. Note also that a broker
cannot obtain a quote from a Direct Writer.

COVERAGE

Following are a few important issues concern-

ing the quality and value of a seaplane
insurance policy. Read your policy or ask
your broker to clarify these issues if you have
any doubt as to how they are handled in your
insurance policy.
Liability Limits
Liability insurance is typically offered as an
aggregate maximum (typically $1,000,000)
with a sublimit of some lesser amount per
person or passenger (typically $100,000 or
$250,000). This means that your insurance
will not pay out more than the sublimit to any
individual person or passenger, and will not
pay out more than the aggregate maximum
as the result of any one accident.

The aggregate limit available to most seaplane

owners is $1,000,000. Higher aggregate limits
and “smooth” (non-sublimited) coverage are
not easily obtained in today’s market, but may
be available in some circumstances.

The difference between a “person” and a

“passenger” is subtle, but very important.
A per passenger sublimit is preferable to a
per person sublimit, as it provides more liability
protection in the event you harm someone who
is not a passenger.

Deductibles
Typical seaplane hull insurance deductibles are
5% to 10% of the hull value. Lower deductibles
may be available in some cases, but expect to
pay more for the additional coverage.

Hail Damage
Some insurance policies will not pay for the
repair of superficial hail damage that does not
A MOVING QUESTION

It pays to read the fine print before committing to ‘not

in motion’ hull insurance. While most policies are
quite reasonable, some consider an airplane to be in
motion unless it is tied down on terra firma or parked
in a hangar. This could leave you without coverage if
wind or other circumstances damage your docked or
beached seaplane.

reduce the airworthiness of the airframe,

although insurance companies do typically pay
for the reduction in the value of the airplane.

Seasonal Conversions
Insurance policies vary greatly in how they deal
with seasonal landing gear conversions. Some
policies require that the conversion schedule
be spelled out in advance. Others estimate
when you will install and remove floats on the
basis of the average season where the airplane
is based, and thus don’t require that conver-
sions occur on a set schedule.

RISK FACTORS

Insurance premiums – and availability – are

driven by risk: the higher the risk, the higher
the cost, and the higher the probability that
the coverage isn’t available at any cost.
Following are but a few of the many risk
factors considered by insurance companies.

Pilots
Insurance companies judge seaplane pilots
by a number of criteria, the most important
of which is flight time in seaplanes. Time in
type, time in amphibs (if insuring an amphib),
and total time are also factored in to the risk
equation. Education, including certificates
and ratings held, as well as recurrent training,
are also important indicators of safety. On the
other hand, an accident history, enforcement
actions, advanced age, and DUIs are undesir-
able risk factors.
Equipment
Just as a sports car costs more to insure than
a station wagon, some seaplanes are more
insurable than others. For example, very
few insurance companies cover experimental
aircraft, and those that do charge more and
choose covered types with care. Other factors
used to determine risk include the number of
seats (less is better), horsepower (less is better
to a point), the type’s accident history, the
availability of factory parts and support, the
age of the airframe, the familiarity (popularity)
of the type, and the type of landing gear
(amphibs cost more).

If you have not yet purchased a seaplane,

consider consulting with a broker to get a
feeling for which of the above risk factors are
most important given the current insurance
market and your personal experience.

Application
It should go without saying that a commercial
operation costs more to insure than pleasure
and business, regardless of whether the
commercial aspect is flight instruction,
sightseeing, charter, or scheduled service.
Commercial seaplane operations can be
difficult and expensive to ensure, and demand
the utilization of a broker well versed in this
type of coverage.
A COS TLY RECOVERY

Don’t overlook the cost of recovery when contem-

plating whether to go without hull insurance. If your
seaplane sinks, or you wreck in the wilderness,
recovering the remains of your airplane could cost
tens of thousands of dollars! In many cases you will
be required to remove the wreckage, regardless of
whether the airplane has any salvage value. Factor
this in to your insurance buying decision, and make
sure your insurance covers salvage of the airplane,
regardless of cost.

STRATEGIC PLANNING

Insuring a seaplane can be very expensive

for an inexperienced seaplane pilot. However,
you can reduce your insurance premiums with
a little strategic planning.

Insurance premiums are based in large part

on your seaplane time, yet few aviation policies
limit the number of hours you fly during the
policy term. Take advantage of this by flying
as much as possible in the first year or two of
ownership. The more you fly this year, the less
your insurance will cost next year. Over several
years, the cumulative effect of this strategy
can save you thousands of dollars. A word
of caution, however: confirm your insurance
company's attitude towards high utilization
rates before putting more than 250 hours
per year on your seaplane.

In some regions, the age, number of seats,

power, rarity, and loss history of a seaplane
type can dramatically influence insurance
rates. Talk to your broker to find out which
seaplanes can be insured for bargain rates in
the current market, and consider buying and
building time in one of these models before
trading up to the model you originally sought.
 MEMBERSHIP BENEFITS

In 1972, a small group of seaplane pilots formed

a dedicated organization with a unique purpose—
to protect the water flying rights of all seaplane
pilots by minimizing restrictions and opening
new waters. Today, the Seaplane Pilots
Association has well over 7,000 members and
a broader mission that includes representing
members' interests at all levels of government,
furthering seaplane safety, reducing the cost of
flying seaplanes, and promoting the sport.

Membership benefits include:

Federal, State, and Local Representation

Water Flying Magazine
Members Only Web Site
Seaplane Insurance Program
Water Landing Directory
Toll-Free Help Line
Free Classified Advertising
Affinity MasterCard
Car Rental Discounts

For insurance quotes and

service, contact Falcon Insurance Agency,
SPA's endorsed insurance partner,
toll-free at 866/217-4772.

4315 Highland Park Blvd., Suite C

Lakeland, FL 33813-1639
Toll-free: 888/SPA-8923
Voice: 863/701-7979; Fax: 863/701-7588
spa@seaplanes.org
www.seaplanes.org